I recently attended a corporate town hall. As part of the Q&A, the CEO stood up and said, “Execution is about results, everything else is a luxury we can not afford at this time.” The sub-text of his statement was that strategy is about thinking (i.e. inaction, indecision) and execution is about getting things done (i.e. something more important). This CEO is not alone. Under considerable pressure to hit aggressive financial targets while minimizing risk, most managers will batten down the hatches and focus on execution. Is this smart business?

Strategic banality

No, but it is understandable given the state of strategy development in many organizations. Many firms have generic corporate and product strategies that are based on frothy and self-evident statements such as “Our strategy is to become the market leader” or “Our strategy is to maximize customer satisfaction.” Not surprisingly, these strategies often do not produce the desired results; they are not differentiated, aligned with the enterprise’s core capabilities and well understood internally. Deploying ineffectual “strategies” can be worse than having no strategy at all, as the process to create them depletes finite resources, uses up valuable time and often leads to employee cynicism. No wonder many results-driven leaders are jaded.

On the surface, the view that strategy is less important than execution is hard to refute. Virtually every manager would agree that you cannot achieve good results without having good execution; similarly, most would concur that having a good strategy alone is no surefire formula for success. But too many people jump to the incorrect conclusion that this makes execution more important than strategy.

Back to basics

Experienced leaders know that strategy is more than clichés. Rather, it is the series of strategic choices (based on thorough analysis and deliberation) organizations make on where to compete and how to win such that they maximize long-term competitiveness and shareholder value at minimal risk. Within this paradigm, execution is about producing results in the context of those decisions. The reality for most companies is that they can’t have great execution without superior strategy. Two well-known examples illustrate this.

Smart phones

It is a foregone conclusion that Apple bested RIM in the battle for smart phone supremacy. Clearly, a large part of Apple’s success traced to its outstanding execution. However, Apple also made definitive and more coherent strategic decisions about where it would play and how it would compete. These included better choices about its target customers and how to reach them; its value proposition in terms of products and features; and the superior capabilities it needed to deliver that proposition to those customers. It was these superior strategic choices that delivered the profitability, brand loyalty and supply chain agility that enabled Apple to out-execute RIM.

Airlines

Another example can be found in the competitive U.S. airline industry. Southwest Airlines has outperformed peers for decades primarily due to their more defensible and profitable corporate strategy. Southwest has a more defined target market (the point-to-point economy traveler), a more compelling value proposition (superior price, convenience, and experience), and a closer fit between the value proposition and the capabilities needed to deliver it (e.g., maintaining a simpler fleet, running a point-to-point operation). Of course, the company is a terrific operator in its own right. But having a better strategy made it possible for Southwest to consistently out-execute its competitors. Unless other airlines improved their strategies, they will never be able to use execution to overcome Southwest’s inherent advantages.

The execution trap

Firms can fall easily into an execution mind-set – to their peril. Market leaders looking to protect their hard-won market share (initially based on a superior strategy) and fully exploit legacy assets will be biased towards execution to drive incremental improvement and minimize risk. Ignoring strategy, however, will leave leaders blind to disruptive products and technologies. Followers, on the other hand, often succumb to a different kind of cognitive trap. To grow, these firms will mistakenly look to out-execute the leaders by mimicking their strategies through the flawed use of benchmarking and best practice tools. Yet, no matter how well followers execute they will still be unable to challenge the leaders who possess superior and proprietary capabilities, technologies and cultures. Followers will usually be better off finding a more distinctive and compelling strategy.

Companies need a good strategy to have first-rate execution. Developing a winning strategy takes time, and requires systematic analytical thinking plus the courage to challenge prevailing assumptions around customer needs, technology etc. The ability to execute with excellence depends on how well the strategy is aligned with stakeholders as well as how it fits with the culture and capabilities. For firms in a rut, refining the strategy may hold the key to unlocking better execution and producing breakthrough results.

Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of strategy and organizational transformation consulting and educational solutions to global Fortune 1000 organizations. Mitchell can be reached at mosak@quantaconsulting.com